Trans Sport, Inc. v. Starter Sportswear, Inc.

• Decision Date: 20 May 1992
• Docket Number: D,No. 810,810
• Citation: 964 F.2d 186
• Parties: 1992-1 Trade Cases P 69,836 TRANS SPORT, INC., Plaintiff-Appellant, v. STARTER SPORTSWEAR, INC., Defendant-Appellee. ocket 91-7915.
• Court: U.S. Court of Appeals — Second Circuit

Page 186

964 F.2d 186

1992-1 Trade Cases P 69,836

TRANS SPORT, INC., Plaintiff-Appellant, v. STARTER SPORTSWEAR, INC., Defendant-Appellee.

No. 810, Docket 91-7915.

United States Court of Appeals Second Circuit.

Argued Jan. 21, 1992.

Decided May 20, 1992.

Peter H. Bouman, Richard W. Mertens, Binghamton, N.Y. (Coughlin & Gerhart) for plaintiff-appellant Trans Sport, Inc.

Kenneth A. Payment, Carol L. O'Keefe, Rochester, N.Y. (Harter, Secrest & Emery) for defendant-appellee Starter Sportswear, Inc.

Before NEWMAN and KEARSE, Circuit Judges, and MARSHALL, Associate Justice Retired. ¹

MARSHALL, Associate Justice Retired:

In this case, we review a district court's grant of summary judgment awarded to a manufacturer charged with violating § 2 of the Sherman Act, 15 U.S.C. § 2. ² 775 F.Supp. 536. The question presented is whether a manufacturer may, consistent with federal antitrust laws, impose restraints on, and refuse to deal with, an authorized retailer that sells the manufacturer's products to other dealers. On the facts before us, we hold that it can.

I

Since 1976, defendant-appellee Starter Sportswear, Inc. ("Starter") has had a license to manufacture and sell satin team jackets bearing the trademark of the four professional sports leagues: Major League Baseball (MLB), the National Football League (NFL), the National Hockey League (NHL) and the National Basketball Association (NBA). These jackets are marketed as "authentic" jackets because they are the style of jacket actually worn at the athletic event by the players, coaches, referees, and support personnel. App. 96. Each of the four leagues has trademarked its authentic jacket styles: MLB has its "Diamond Club;" the NFL has its "Pro Line;" the NHL has its "Center Ice;" and the NBA has its "NBA Authentic." Exh. to App. 205. While numerous manufacturers are licensed to produce a smorgasbord of league merchandise, including jackets, bearing the teams' official trademarks, only Starter and a handful of other companies are licensed to manufacture and sell authentic team jackets nationwide.

The Stickley Corporation ("Stickley"), the predecessor-in-interest to plaintiff-appellant Trans Sport, Inc. ("Trans Sport"), sold Starter's authentic team jackets on a retail basis. This dispute arose when, after about six months of retail sales, Stickley began reselling Starter's authentic jackets to other retailers nationwide. Stickley perceived a business opportunity created by Starter's policy of requiring its retailers to place a minimum order. By eliminating the minimum order requirement for Stickley's customers, Stickley was able to provide special order or out-of-season product to them, a service for which it imposed a $7-per-jacket mark-up.

In March 1987, Starter's national sales manager advised Stickley that Starter would discontinue its business with Stickley if Stickley did not limit its resale of Starter team jackets to sales through a consumer catalog and from Stickley's retail store. Starter refused to ship Stickley's Fall 1987 order of jackets unless Stickley agreed not to distribute Starter's products to other retailers. When Stickley refused to comply, Starter inserted the following conditions in its new order forms:

No Transshipments: Starter has a policy of selling only directly to selected retail outlets for resale by them at specified locations. Proposed sale at any new retail outlet requires advance written approval from Starter's Home Office. Resale or transshipments of our merchandise to an unauthorized location or to another business contravenes that policy and the items and conditions of sale and may result in nonshipment or termination of the retailer's business relationship with Starter. Exh. to App. 470.

When Starter refused to honor outstanding orders from Stickley after February 16, 1987, Stickley's sister corporation, Trans Sport, filed suit under § 2, seeking treble damages and injunctive relief. Trans Sport alleged that Starter had monopoly power in the market for authentic jackets and that it intentionally used its monopoly power to eliminate Stickley as a competitor at the distributor-wholesaler level in violation of Starter moved to dismiss the complaint pursuant to Fed.R.Civ.P. 12(b)(6). The District Court denied the motion. App. 34. After two years of discovery, Starter moved for summary judgment. It argued that Trans Sport could not sustain its § 2 action because Starter did not have monopoly power in the relevant market and that even if it possessed monopoly power in the jackets it manufactured, it had not caused unreasonable anti-competitive effects. The District Court granted Starter's motion for summary judgment. App. 363.

                §   2.   Trans Sport also alleged that Starter's actions were intentionally taken to maintain artificially high prices at the consumer level, that Starter knowingly maintained monopoly power at the distributor-wholesaler level, and that because of Starter's refusal to deal, Trans Sport could not obtain and supply the products necessary to service the retail market for authentic team jackets
                

Relying in part on the Supreme Court's decisions in Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 596 n. 19, 105 S.Ct. 2847, 2854 n. 19, 86 L.Ed.2d 467 (1985) and United States v. Grinnell Corp., 384 U.S. 563, 570-71, 86 S.Ct. 1698, 1704, 16 L.Ed.2d 778 (1966), the court noted that to sustain a § 2 claim, a plaintiff must prove that the defendant (a) possesses monopoly power in the relevant market and (b) has acquired or maintained that power willfully rather than through growth and development as a consequence of a superior product, business acumen, or historic accident. App. 353. The court did not decide whether Starter possessed monopoly power in the relevant market because it held that even assuming arguendo that Starter had such power, "preventing plaintiff from continuing in the wholesale distribution market does not constitute the unreasonable exercise of defendant's distribution monopoly power under federal antitrust law." Id. at 352-53.

We review the District Court's grant of summary judgment de novo. Bryant v. Maffucci, 923 F.2d 979, 982 (2d Cir.), cert. denied, --- U.S. ----, 112 S.Ct. 152, 116 L.Ed.2d 117 (1991). Viewing the evidence in the light most favorable to the nonmoving party, we determine whether there are any genuine issues of material fact and whether the moving party is entitled to judgment as a matter of law. Id. "Once the movant has established a prima facie case demonstrating the absence of a genuine issue of material fact, the nonmoving party must come forward with enough evidence to support a jury verdict in its favor, and the motion will not be defeated merely ... on the basis of conjecture or surmise." Id. Because we agree with the District Court that Trans Sport cannot sustain its § 2 claim, we affirm.

II

Ordinarily, under the first prong of the test articulated in Aspen Skiing, 472 U.S. at 596 n. 19, 105 S.Ct. at 2854 n. 19, and Grinnell Corp., 384 U.S. at 570-71, 86 S.Ct. at 1704, we would first determine the relevant market and then decide whether Starter possessed monopoly power in that market. In this case, however, we do not pursue such an inquiry because we agree with the District Court that even if Starter possessed monopoly power in the relevant market, however construed, ³ Trans Sport's § 2 claim cannot prevail.

To sustain a § 2 claim, the plaintiff must prove not only that the defendant had the power to monopolize, see Aspen Skiing, 472 U.S. at 602 n. 28, 105 S.Ct. at 2857 n. 28, but also that it willfully acquired or maintained its power, Volvo N. Amer. Corp. v. Men's Int'l Pro. Tennis Council, 857 F.2d 55, 73 (2d Cir.1988), thereby causing unreasonable " 'exclusionary,' " or " 'anticompetitive' " effects. Aspen Skiing, 472 U.S. at 602, 105 S.Ct. at 2857 (citation omitted). Proof of willful intent and unreasonable exclusionary or anticompetitive effects is required to allow a trier of fact to distinguish "between conduct that defeats a competitor because of efficiency

                and consumer satisfaction, and conduct that 'not only (1) tends to impair the opportunities of rivals, but also (2) either does not further competition on the merits or does so in an unnecessarily restrictive way.' "  United States Football League v. National Football League, 842 F.2d 1335, 1359 (2d Cir.1988) (quoting Aspen Skiing, 472 U.S. at 605 n. 32, 105 S.Ct. at 2859 n. 32 (quoting 3 P. Areeda & D. Turner, Antitrust Law 78 (1978))).   If a company has " 'attempt[ed] to exclude rivals on some basis other than efficiency,' it is fair to characterize its behavior as predatory."  Aspen Skiing, 472 U.S. at 605, 105 S.Ct. at 2859 (citation omitted)
                

A

Trans Sport contends that Starter's no-transshipment policy and refusal to deal with Trans Sport unless it agreed not to sell Starter products to other dealers establish Starter's willful intent to exclude intrabrand competition. This claim is without merit.

Starter acquired its right to manufacture authentic jackets through various licensing agreements with the Leagues. App. 37-38, 67. Starter's licenses are of limited duration and may be terminated or not renewed if the Leagues are dissatisfied with Starter's products or performance. Id. at 41, 67, 83; Exh. to App. 582, 586-87. Rival manufacturers can, and apparently do, compete with Starter to gain the right to manufacture and distribute authentic jackets. Although Starter has been granted a license to manufacture authentic jackets since 1976, the accumulation of such licenses is not, in and of itself, unlawful. See Automatic Radio Mfg. Co., Inc. v. Hazeltine Research, Inc., 339 U.S. 827, 834, 70 S.Ct. 894, 898, 94 L.Ed. 1312 (1950). As we have consistently made clear, "[s]uccess alone is not enough [to sustain an antitrust claim] or the antitrust laws would have their greatest impact on the most efficient entrepreneurs and would injure rather than protect consumers." National...